How to Protect Yourself from Mortgage Fraud in Canada

Mortgage fraud and title fraud are the most devastating types of real estate fraud in Canada. Although real estate fraud in general hurts homeowners, victims of mortgage fraud and title fraud can lose the only home they have and end up homeless.

What is the Difference Between Mortgage Fraud and Title Fraud?

Title fraud involves someone masquerading as the homeowner to sell the home or get a mortgage loan from the home. Mortgage fraud involves intentionally submitting inaccurate, incomplete, or fraudulent information to the lender to get approved for a mortgage that the homeowner does not qualify for. In most cases of mortgage fraud, there is usually a claim for a higher income, use of falsified appraisal of the property, or fake identifications. These can be discovered by counterchecking submitted documents for veracity.

Is Mortgage Fraud a Big Problem in Canada?

Mortgage fraud affects lending institutions and the banking industry profoundly. The homeowner who got approved for a mortgage that they cannot truly afford also stand to lose their home with just a minor financial mishap in the future. This is why organizations that are involved in real estate, the banking industry, and the police take mortgage fraud seriously. Unfortunately, there is no central agency that records incidences of mortgage fraud and those that discover it seldom report it; hence, there is no real statistical data that can gauge how prevalent is mortgage fraud in Canada.

Are Banks Working to Prevent Real Estate Fraud?

Banks have plenty of measures in place to identify and prevent cases of real estate fraud. They work with private investigators, real estate task forces, law enforcement, as well as their own security teams to catch criminals and develop better ways to protect against mortgage fraud and other types of real estate fraud. More so, the Canadian Bankers Association work with lenders, the legal profession, and other organizations to continually make changes to deter those who may be inclined to commit real estate fraud.

Protect Yourself from Mortgage Fraud

Fraudsters will take advantage of any weakness to commit fraud. As an individual, you must report suspicious activities and actively protect your personal data to avoid it getting used for fraud. If you own your home and want to prevent mortgage fraud and title fraud, then be sure to observe the following measures:

  • Refrain from giving out personal data via phone or email especially if you did not initiate contact with the people asking for your details.
  • Make sure all bills arrive on time and are not intercepted by identity thieves.
  • Safeguard your mail. Update addresses when moving to another place and do not leave mail in the mailbox.
  • Protect items with personal information such as phones, laptops, tablets, packages, memory cards, and the like. If throwing them out because they are no longer of use, be sure that important data are no longer readable or are already erased.
  • Keep your Social Insurance Number Card in a safe place. Do not use your SIN unless necessary.

What to Do If Your Business Fell Victim to Mortgage Fraud?

Fraud can still take place even when institutions and individuals are careful with their data. The first thing to do upon discovery of fraud is to gather all information that you can related to it. Note that the law has many ways to help you recoup losses if mortgage fraud is proven. If you need help proving mortgage fraud, it might be best to contact private investigators. Modern private investigation services use technology to trace possible fraud and provide you with information that can be used as proof in court.


The 3 Most Common Types of Identity Theft

Identity fraud and identity theft are common occurrences these days. They happen when someone obtains and uses someone else’s personal data in a fraudulent or deceitful manner for economic gain or other reasons. The problem is becoming even more prevalent because of misinformation online and the lack of response from appropriate agencies to fix it.

The categories of identity theft include:

  • Account takeover fraud
  • Business or commercial identity theft
  • Criminal identity theft
  • Identity cloning
  • Medical identity theft
  • New account fraud

For this write-up, we will focus on just the 3 most common types of identity theft because each type above has numerous subtypes and may need an entire book to cover everything. It is important to spread awareness about the common types of identity theft because not only can they result in financial loss, some examples can really destroy lives for the long-term.

Account Takeover Fraud

The most common account takeover fraud is financial identity theft wherein the criminal uses another person’s account information such as bank account details to obtain services and products. It can also mean withdrawing money from a person’s bank account. Oftentimes, perpetrators get the data from online sources such as by phishing or can be offline sources such as lifted from purses or wallets, the mail, the phone, or even by going through the trash. Most of the time, the victim is the first person to notice discrepancies such as additional charges on a credit card, unauthorized withdrawals on a bank account, or having a few bounced checks. Oftentimes, perpetrators pose as the victim to pull off this type of identity theft.

Business or Commercial Identity Theft

Using another person’s name or business details to get products and services fall under business identity theft or commercial identity theft. The usual way this is done is by using a company’s or an individual’s social security number. Some numbers that are readily available in dumpsters, public records, and the like may also be used to commit this type of identity theft. In a lot of cases, business identity theft is an inside job or committed by ex-employees or current staff. Most victims of business identity only became aware of the crime after significant losses or until when someone notices discrepancies in the records. The reason why businesses can often lose large amounts of money to this type of identity theft is because this can go on for years without anyone noticing.

New Account Fraud                      

New account fraud is when someone else uses another person’s details and good credit standing to create a new fake account to obtain products and services. This can be done by creating a new cell phone, new credit card, or new utility bill account using the stolen details of another person. The thief will use another mailing address so the real person behind the stolen identity will not know about the fraud until much later when there’s already been a lot of debt under their name or SSN or when they get turned down from credit application because of bad debts that they know nothing about.

Were you a victim of identity fraud? Do you know that private investigators can help you uncover the people behind it as well as check for possible breaches in your privacy to prevent it from occurring again? Contact us at Haywood Hunt to know more about identity fraud prevention and what actions you can take against it!

How to Know if You Are Being Catfished? These Are the Signs

Catfishing has become so rampant online that it is becoming increasingly more challenging to trust people even when they seem real. With stories of catfishing going viral at times, it is not easy to allay doubts, especially when you meet someone online that you truly want to be real. If you want to protect yourself from being catfished, you should know the signs to look out for.

First, What is Catfishing?

Catfishing is the act of deceiving someone into having a relationship online by using a false identity. People do this for a variety of reasons. Some catfish to pull off a cruel prank, some do it because they want attention, some catfish as the first step to grooming and abduction, and some catfish to scam someone for money. Whatever the catfish’s reasons are, the practice of catfishing is deceitful and results in hurting someone. Below are the tell-tale signs that you are being catfished.

No Phone Calls

Because the catfish is not the person they claim to be, it is difficult for them to keep up the charade during a phone call. They thus avoid phone calls and will come up with a multitude of reasons to not have to answer phone calls. Some may leave voice messages instead of answering calls to prove that they are real but note that apps now exist that can alter someone’s voice.

Fake Photos or Questionable Photos

We are now at an age where we can reverse-image search photos and see if they are associated with an account or to identify the people in them. Some catfishes even use stock photos or model’s photos which are usually uncovered with a reverse image search. Also, if all the photos that someone share seem too professional, it can be a sign that you’re being catfished.

No Followers or Friends on Social Media

A relatively new account with no followers or friends is a sign to be wary of. Although shy or introverted individuals may have few friends or followers, someone like this who also has the other signs mentioned in this article should place you on high alert.

No Video Chats and Real-Life Meetings

If someone wants to be in a relationship with you but will decline a short video call or make up excuses to meet up in real life (barring a distance of hundreds of kilometres), then it could be that they aren’t who they claim to be. No matter how shy someone is or how nervous they are about meeting you, they won’t be proposing to have a relationship with you online if that is truly the case. A 3-minute video call shouldn’t be too difficult for them.

Stories with Too Many Inconsistencies

If someone claims to be from a certain area and can’t tell you anything about their town, or claims to be from a certain school and can’t disclose what year they graduated, then it might be time to take notes. You can use the notes to compare inconsistencies later.

They Seem Off

Someone declaring love without meeting you or wanting to be in an exclusive relationship with you too soon is not normal. If they make you feel uncomfortable, or something doesn’t feel right, it is best to listen to your intuition.

Asking for Money

Asking for a gift, a loan, financial help, or any form of money is one of the hallmarks of being a catfish. As a rule of thumb, you should never send money to anyone you have never met and spent time with.

If you suspect you may be a victim of a catfishing scheme, Haywood Hunt & Associates Inc. is here to help. Contact us today!


How to Spot a Business Email Compromise (BEC) Fraud like a Pro

Business Email Compromise fraud (BEC fraud) is a group of fast-growing type of scam in Canada that targets businesses. If you own a business, it is best to get acquainted with the tactics that BEC fraudsters use so that you’ll be better equipped to protect yourself moreso that business transactions are moving towards online channels these days. The recent data by the Canadian Anti-Fraud Centre says that the worldwide cost for BEC fraud is estimated at about $5 billion dollars.

Spot Business Email Compromise Fraud

Know that BEC fraud is not a single scheme type of scam. It is composed of several schemes such as supplier phishing, CEO scam, and information theft. Supplier phishing involves fake emails that look like they came from known suppliers. Any money sent to the accounts provided by scammers via supplier phishing won’t go to the actual suppliers. CEO scam involves emails that look like they came from senior executives of the business. The receiver is tricked to wire money to a third party thinking that the order came from higher ups but are really just from scammers. Information theft looks like emails from legitimate entities requesting for sensitive information. Any information shared via these channels can then be used by the fraudsters to commit CEO fraud and supplier phishing.

Protect Your Business from Email Fraud

Protection from email fraud means that the management and employees must work together to learn about having checks and balances or enhanced email safety protocol for the benefit of everyone. Understand that BEC fraud doesn’t discriminate between large and small businesses and the sooner everyone is educated about email fraud tactics, the sooner everyone will be equipped with the knowledge they need to prevent it from happening.

Best practices to prevent Business Email Compromise Fraud include:

Being cautious at all times. Employees must take precautions about the information they share on social media sites as well as other places on the internet. Details such as someone being on vacation can be used by fraudsters to manipulate the situation to their liking.

Educating employees and employers alike. A lot of people still do not know that email addresses can be spoofed these days. As a result, it is easy to fool people to send money over using wire transfer because they think the email truly came from a colleague or from a superior. A tell-tale sign of BEC fraud is an urgent money request via wire transfer.

Learning to verify. Plenty of scams could be easily thwarted by making it a habit to verify information. If your business got an email request for payment, be sure to call or talk to the other party via their known contact details to verify if the request truly came from them.

Protecting assets electronically. Having firewalls in place, ensuring software and anti-virus are updated, and preventing copying of sensitive data can go a long way in making sure that you will have lower risk for BEC fraud.

What to do if You Suspect BEC Fraud

If your business has fallen for or has been targeted for BEC fraud, be sure to contact relevant authorities as well as your financial institutions. In some cases, transferred money can be placed on hold and can be recovered. If you need more help preventing BEC fraud or any other business online scam, then contact us today so we can let you know  how our private investigation services and private investigators can help your business.


Canadian Job Seekers Defrauded in Elaborate Online Scam

It’s no secret that the COVID-19 pandemic caused a huge increase in the cases of fraud, especially online-based fraud and scams. 25-year-old Ashley from Canada found out about this the hard way when she used career sites online to look for jobs in sales, marketing, and coordination after losing her position as a French program coordinator due to the COVID-19 pandemic. What looked like a remote job with Vancouver tech company Gux-IT turned out to be something she wasn’t prepared for.

Brewing Suspicions

Wary of online scams despite being thrilled with the prospect of a good work from home job, Ashley checked Gux-IT’s website to find out if the vacancy was legitimate, making sure to thoroughly read through the various pages of the website. She recalls that she spoke on the phone with someone who was using a B.C. area code and who emailed her from what looks like Gux-IT’s email addresses. Ashley thought that she did everything to make sure that the job is legitimate, however, everything about it was fake. The Gux-IT website that she checked was fake and was copied by fraudsters from a foreign incorporated company that is not connected to them in any way.

Watch Out for Job Scams

What happened to Ashley can happen to anyone. Job scams are increasingly becoming common according to Canadian Anti-Fraud Centre senior RCMP intelligence analyst Jeff Thomson. Proof of this is that we are only a little over half the year and the reported cases for 2020 is already more than 2,300; close to the total cases of about 2,400 reported for the whole year of 2019. Fraudsters are taking advantage knowing that many people lost their jobs due to the pandemic.

What is the Purpose for These Fake Jobs?

Fraudsters are creating fraudulent websites pretending to be fake Canadian companies to attract job seekers that they can use to transfer money into cryptocurrency. In Ashley’s case, the fraudsters hired her and got her details. During her first day, they tasked her to help the IT department by advising them and buying a software on their behalf. She was told to buy domains and to use a cryptocurrency called Ethereum. They transferred money to her account and told her to withdraw their e-transfer and then deposit the amount to a cryptocurrency wallet. Luckily, she was able to save screenshots of her Telegram conversation with the fraudsters and contacted her Scotiabank branch to alert her if there is anything suspicious. After the transfer arrived, she withdrew it and deposited to the cryptocurrency wallet. Later that day, she found out that the company’s address is fake and that everything was just an elaborate cash-out scam designed to launder money and throw law enforcement off their tracks. If she didn’t have records that this was her first day on the fake job, the law could view her as an accomplice for fraud and she could be held responsible for the crimes perpetrated by the scammers.

Avoid Online Job Scams

The first rule of thumb is that if something is too good to good to be true, it is best to take extra precaution and make sure that your bases are covered. If a company you did not apply to seeks you out, perform due diligence and see if they are who they say they are both online and offline. Keep a record of everything as well. If you need help performing a background check or think that there is something suspicious about a job you’ve been newly hired for, we can help you at Haywood Hunt. Our private investigators can get you the answers you need for your piece of mind. Contact us today.

Ethical Leadership in Business: How to Deal with Dilemmas

Remember Sherron Watkins? You might not. It’s been almost two decades since Watkins was the vice-president of corporate development at the disgraced Enron energy company, but today is most often referred to as its whistleblower. A certified public accountant with a master’s degree in professional accounting from the University of Texas, Watkins joined Enron after working for the poster child of accounting fraud, auditing firm Arthur Andersen, for eight years.

Why was the Enron financial scandal not exposed earlier? Why did it take years before a concerned employee came forward? Why did no one stop the “smartest guys” when the lights went out in California? Ms. Watkins cited four key factors that could be applied to many organizations and their employees:

  • fear of losing one’s job
  • fear of rocking the boat and being ridiculed
  • an “it’s not my concern” attitude
  • a “group think” culture that does not tolerate criticism of the corporate viewpoint

Fear, apathy and peer pressure. It sounds like high school. But how many employees, regulators, investors and others with links to today’s scandals are now saying, “if only I had shown some ethical leadership and done something”?

Who “Made Off” with the Money?

While the full story is not yet known—and experience tells us that it will take years to uncover all the facts—the sheer size of the fraud allegedly committed by Bernard Madoff, the American businessman and former chairman of the NASDAQ stock exchange, adds another layer to the general public’s mistrust and cynicism of the ethics of people in high places.

The Madoff case appears to be a Ponzi scheme of gigantic proportion but subtle variation. The structure of such schemes have been around for centuries but were made famous by the eponymous Charles Ponzi, who defrauded investors in the United States through fraudulent activity involving the exchange on international postal reply coupons. The classic Ponzi scheme is one in which the returns on investors’ funds are not obtained through actual earnings but from the principal contributed by subsequent investors. No legitimate investment exists, and the funding from subsequent investors is used to pay off earlier obligations, which provides the appearance of legitimacy.

Madoff’s scheme was typically Ponzian in structure, but varied in both pace and marketing. Bernard l. Madoff investment Securities offered its exclusive clientele modest but steady returns in both bull and bear markets, rather than the typical Ponzi paradigm of suspiciously high returns to all comers. Furthermore, charitable foundations, rather than individual investors, were many of Madoff’s victims, organizations that one would assume to be sufficiently sophisticated to see through all his smoke and mirrors.

Nevertheless, not only was the Madoff scheme typical in Ponzi structure (using new or annual investments as “returns” to established clients), it also shared a few other attributes. Madoff indicated to clients that the intricacies of his investment strategy were too complicated to explain in simple terms. Madoff also claimed that the secrecy of his strategy and investments was important. The “beauty” of the Madoff scheme, however, was in how it diverged from three key aspects of the traditional Ponzi:

  • Questionable or limited information on the background of the promoters of the investment
  • Promoters who are not registered with any securities regulator or self-regulatory organization
  • Obstructions to due diligence because of key offices or institutions in foreign jurisdictions

Mr. Madoff was an established investment veteran with impeccable credentials operating in plain sight in one of the foremost investment capitals in the world. In the end, who had the courage to come forward and blow the whistle? Not the regulators. Certainly not the investors, who were blinded by steady returns and a false front of legitimacy. It was instead the Sherron Watkins of Bernard l. Madoff investment Securities: Mark and Andrew Madoff, sons of Bernard.

Ethical Issues

One can only imagine the horror experienced by Watkins and the Madoff boys. To discover that fraud is occurring all around you is to be faced with an ethical dilemma that many would prefer to simply ignore. Though the ethical dilemma is personal (“should I blow the whistle?”) the ethical issue is institutional.

Ethical issues come in all shapes and sizes, and by no means are they all related to financial fraud. They can be legal or illegal. They can be simple or complex. Their consequences can be minor or severe. Some of the topical ethical issues that companies face today are:

  • affirmative action or preferential hiring programs
  • corporate donations to non-profit organizations
  • the outsourcing of jobs to countries where labour is less ex-pensive
  • the outsourcing of production to countries with looser environmental or health and safety laws
  • tax minimization strategies

Note that none of these practices are illegal. Indeed some, like affirmative action programs or outsourcing, become popular economic or social trends. Others, like corporate donations to non-profits or tax minimization strategies, are simply good business.

What they share, however, is the advantageous treatment of one group at the expense of another. They involve choice. And choice requires leadership. So how do people guide themselves in their choices when ethical roadmaps don’t exist and ethical issues are a moving tar-get? After all, ethics vary from person to person. Ethics vary from country to country. Ethics vary from culture to culture. It may help to take a step back for a moment and imagine a pyramid based on enforceability.

Ethical Enforceability

In most societies, the basic ethical standard is criminal law. We all agree that people should not break the law. But how many times have you heard that old saw, “if it ain’t illegal, it must be ethical”? Ethical behaviour is not enforceable law, because criminal law alone cannot encompass all ethical issues and therefore cannot enforce ethical behaviour. Yet criminal law—the entirety of the criminal code and its penalties—provides business with an ethical base.

The most difficult ethical dilemma is not about right versus wrong. It’s about right versus right. It’s about the right away to con-duct business, and if the dilemma is particularly tough, that’s usually because there are powerful ethical arguments on both sides. Too often, the scandals that make the headlines are the result of perfectly legal but appalling and outrageous behavior that highly offends the public. That’s why you need regulatory law. It’s the next level in the pyramid.

These are the regulations that govern industries and professions. They may be self-imposed or imposed by government in some form of regulatory agency. They exist not only to regulate the behaviour—typically through a disciplinary process—of organizations and individuals but also to serve as a framework that acts as a moral guide.

Here it may be useful to take note of CGA Ontario’s “Code of Ethical principles and rules of Conduct” (“the Code”), as a template of regulatory law. A professional organization and its members are granted the legal right by society to organize itself, to control en-trance into a profession and to formulate standards of behaviour governing its members. in return for this right, its members are to act in the interest of society and the public.

The Code encompasses both ethical principles and rules of conduct, and articulates the ethical obligations of all CGAs as well as desirable character traits and values that guide our ethical behaviour. It would be impossible to overestimate its importance in both the personal and professional life of every CGA. Without question, to be called upon by the chair of CGA Canada to rise and recite the Oath of Obligation at the Admission to Membership Ceremony is a profound experience, and an occasion no CGA ever forgets.

In this way, we might say that a framework of common behaviour—and the sanction that results when one betrays the trust of one’s colleagues—helps to regulate individuals to a degree to which organizations are immune. Thus the need for corporate policy.

Though corporate policy is typically less enforceable than criminal or regulatory law, it still informs ethical behaviour. The weakness of corporate policy, however, resides in its obligations: if a company’s main purpose is to maximize returns to its shareholders, then it could be seen as unethical for a company to consider the interests and rights of other groups. That is why many people believe that corporate policy primarily exists to limit legal liability or curry favour by presenting the image of the good corporate citizen. it is also why many believe that ethical problems are better dealt with by depending upon employees to use their own values as their guide.

The Behaviour Ladder shows that, while a corporate policy may be legal, it may still fall short of ethical behaviour, and be inconsistent with the values of employees. Similarly, even though ethical behaviour is both higher and dependent upon both criminal law and corporate policy, it may not mesh with individual values. Of course, the value system of many individuals is not consistent with the reality of every criminal law; nevertheless, if we are all to climb the ethical ladder, we need a common rung on which to begin.

Ethical Criteria

So how can you determine what is ethical? For example, if a new corporate marketing decision has been made with which you are uncomfortable, what tests can you apply to see where it stacks up on the ethical scale? Here are a few criteria that will help:

  • Is it legal? if the course of action is not legal, then it should not be done. Take steps to identify the illegality of the issue and ensure that you do not participate in its implementation.
  • Do the benefits exceed the cost, regardless of to whom they accrue? Ask yourself what the benefits are of the policy and to what extent do they outweigh the costs of the course of action. This may help you to identify who or what benefits from a specific decision.
  • Are you prepared to let everyone in your organization carry out the proposed action?
  • The Light of Day. Would you be comfortable if your actions were exposed both inside and outside your organization? (A variation of this is the parental test—would you be willing to tell your parents what you have done?)
  • The Golden Rule. What would you say if the proposed action were done to you? your own reaction may provide guidance as to whether the action is ethical.
  • The External Test. Discuss your proposed course of action with others. If feedback indicates that the proposed course of action is an ethical issue, think long and hard before proceeding.

The late Robert Noyce, legendary co-inventor of the microchip, once said, “if ethics are poor at the top, that behaviour is copied down through the organization.” While I admire the sentiment, I don’t completely agree with it. The fact is that in every organization there are employees who are whistleblowers in waiting. Remember Sherron Watkins? She wrote a detailed, no-holds-barred seven-page letter to her boss, Kenneth lay, telling him company was just a giant Ponzi scheme. And she was circumspect enough to take the external test before writing it—she discussed her ethical dilemma with her former partners at Arthur Andersen.

As long as there is business, there will be situations that test the ethics of business participants. But in the words of the financier Henry Kravis, who knew a thing or two about the ethics of building a business empire in the same city that spawned Bernard Madoff “if you build that foundation—both the moral and the ethical foundation—as well as the business foundation and the experience foundation, then the building won’t crumble.”

COVID-19 Pandemic Brings Surge in Online Puppy Scams Warns Better Business Bureau

Isolated people during the COVID-19 pandemic are being targeted by scammers for online puppy scams. COVID-19 Scams have been making news since March 2020 and it seems like there is no end to what fraudsters can come up with to take advantage of other people. The Better Business Review over Mainland British Columbia is warning Canadians of the recent spike in the number of online puppy scam reports.

Warnings Issued

The warning was issued by Better Business Bureau after they’ve received increased reports from consumer assistance organizations across the country. The reports say that more fraudulent pet websites were discovered in April 2020 compared to the total from the entire first quarter of the year.

BBB Mainland B.C. spokeswoman Karla Laird says that scammers are exploiting would-be-pet-owner’s desires of finding a puppy to help them cope during these trying times. She further shared that scam victims from Victoria to Toronto and Halifax have been reporting getting duped by fraudsters while trying to buy a puppy online.

In response to the above, the Better Business Bureau shared tips on how to avoid getting victimized by online puppy scams. They are as follows:

  • Do not buy a pet without seeing the pet in person
  • Do not buy a pet from non-established sellers
  • Avoid sending money prior to seeing the pet in person
  • Avoid payment methods such as gift cards, Moneygram, or Western Union as they are commonly used by fraudsters who do not want to be traced

Sophisticated Pet Scams Online

The Bureau found out in an earlier study that those who engage in online puppy scams and other successful scams rely on sophisticated advertisements to lure unsuspecting consumers. The advertisements make it seem that there is a legitimate business behind the ads, as the ads are sponsored content and usually lead to a seemingly well-crafted website. Experts estimate that as much as 80% of the sponsored ads that are about pets are fraudulent, according to the BBB.

How to Spot Online Pet Scams

An example of a fake pet ad and website is a website targeting people who wants to buy a Cavalier King Charles Spaniel. The website claims to be from Tulsa, Oklahoma and may seem legitimate at first glance, until one takes a deeper look. Legitimate sites will have an online history or footprint, with numerous links online and via social media as well as social media accounts that go back months if not years. If a website has only been active between February to May 2020, then it could be one of the fake websites specifically created to scam people while COVID-19 is around.

It is best to do a lot of research on an intended breed before adopting a dog, including pricing as well as specific breed illnesses. If a website is trying to sell a puppy too cheap or claims a 100% guarantee of no health issues; and interested to sell to whomever shows an interest, then the motives behind the sale may be less than ideal. Experts suggest looking up dogs in shelters as the pandemic caused quite a lot of healthy and purebred dogs to be surrendered. Such an adoption will be legitimate, there is no possibility of being scammed, and you get to meet your new dog in person.

Do you know someone who may have been a victim or was targeted for an online puppy scam? Our private investigation services can help uncover truths and verify if a website is legitimate or not. Contact us today and we’ll do our best to get our private investigators to work on your concern as soon as possible.


Deception in Financial Statements

In a recent case investigated by the Royal Canadian Mounted Police (RCMP), the senior executives of a publicly traded company were charged with fraud related to the financial statements of the company. The RCMP stated that the accused created an elaborate scheme of paper trails that exaggerated the financial position and the performance of the company in order to mislead investors, creditors and auditors. Revenues were overstated in successive quarters, false sales were recorded in the accounting records and high interest loans were not recorded.  The company eventually went into bankruptcy, at which point the deception was uncovered. Creditors and investors lost millions and employees suffered through unpaid wages.

Financial statement fraud is the deliberate misrepresentation of the financial condition of an enterprise. Its intent is to deceive financial statements users (e.g., shareholders, creditors, regulators). It has many forms and guises, but is perpetrated through intentional misstatements or omissions of amounts in financial statements. It occurs in large publicly traded companies. It occurs in small family-owned firms. CGAs should be aware of the red flags that may indicate the presence of financial statement fraud and then make the appropriate examination to determine if their concerns are warranted. It is often the small extra inquiry by an accounting professional that exposes the presence of financial statement fraud.

The extent of financial statement fraud varies but the techniques used to perpetrate it generally fall into the following categories:

  • fictitious revenues
  • fraudulent asset valuations
  • fraudulent timing differences
  • concealed liabilities and expenses
  • improper or fraudulent disclosures or omissions

Fictitious Revenues

Fictitious revenues are probably the most common form of financial statement fraud. In this scenario, false sales are recorded in the books and records of the company. Often, the offsetting entry will be to accounts receivable. However, there are also other methods of manipulating the revenue side of financial statements. Other techniques include the recording of consignment sales and sales with conditions, failing to record the return of goods sold, improper write-off of receivables, and non-recognition of sales discounts. All these techniques can have the effect of making revenues appear greater than they actually are.

Fraudulent Asset Valuations

Improper asset valuations can be used to manipulate financial statements to the point that they are misleading and fraudulent. This can be done in several ways. Often, an intentional violation in the application of the “Lower of Market or Cost Rule” has been done in order to manipulate the financial statements of an enterprise. Estimates of an asset’s residual value or useful life can also be manipulated. Other schemes to inflate current assets at the expense of long term assets can be undertaken in order to manipulate financial ratios.

Fraudulent Timing Differences

The misapplication of timing difference protocols in accounting can result in financial statements being manipulated. Essentially, timing differences can shift revenues from one reporting cycle to another. The same technique can be used to shift expenses. The result can be that expenses are either overstated or understated in a particular period. In the context of fraud, this technique allows the management of a company to manipulate earnings in order to hit predefined targets.

Concealed Liabilities and Expenses

Concealed liabilities and expenses can have significant impact on financial statements, because concealed amounts have a direct impact on the bottom line of a corporation. The pre-tax income is increased to the full amount by the expense that is not recorded. Concealing liabilities is often easier to do than inventing fictitious revenues, as the latter often requires the creation of false documentation such as false invoices or sales receipts. Concealing liabilities can be as simple as capitalizing an expenditure, rather than correctly placing the cost in the appropriate expense account. Another method is the understating of warranty costs for an enterprise. Failing to adequately disclose the true warranty expense for a business can be of benefit to corporate criminals who wish to manipulate financial statements.

Improper or Fraudulent Disclosures or Omissions

As a general rule, financial statements must contain all information to prevent a user of those financial statements from being misled. Notes to financial statements should contain narrative disclosures, supporting schedules, and any other information required to avoid misleading financial statement users. Improper or inadequate disclosure in financial statements can be any of the following:

  • accounting changes
  • liability omissions
  • management fraud
  • related party transaction
  • subsequent events

The degree of the lack of disclosure in any of these examples can amount to the fraudulent omission of a material fact that, in turn, makes the issuance of financial statements fraudulent.

The Defence Against Financial Statement Fraud

Financial statement fraud can be insidious and shrouded. It may have perpetrated for years in any particular business or organization without exposure. Often, when it is finally detected, it is too late; creditors, investors and shareholders have been victimized with no hope of recovery. How then, can we immunize ourselves from financial statement fraud?

The answer lies in a close examination of financial statements for any red flags that may emerge. Each of the types of financial statement fraud outlined in this article has its own red flag, but there are many common warning signs of financial statement fraud. (I recommend the Canadian edition of the Fraud Examiners’ Manual, published by the Association of Certified Fraud Examiners, for extensive reference.)

While I’ve grouped the examples into categories for the sake of simplicity, any one of these warning signs—sometimes alone, sometimes in combination with other signs—can be the key to the discovery of fraud.

Accounting and Statement Warning Signs

  • Negative cash flows while reporting positive earnings.
  • Rapid growth or unusual profitability.
  • Unusual and highly complex transactions, often close to year end.
  • Unusual changes in key financial ratios.
  • Unusual increases in gross margin.

Economic and Sector Warning Signs

  • Assets, liabilities and expenses based on significant estimates.
  • Declines in customer demand.
  • Increasing business failures in the sector.
  • Significant bank accounts or operations in tax haven jurisdictions.
  • Significant related-party transactions.
  • Rapid growth or unusual profitability.
  • Repeated use of materiality to justify inappropriate accounting entries.

Corporate Culture and Structural Warning Signs

  • Domination of management by a single person or small group.
  • Excessive participation by non-financial managers in accounting issues.
  • Formal or informal restrictions on the auditor that limit access to key persons.
  • Ineffective communication and implementation of company’s values and ethical standards.
  • Ineffective or weak board of directors and audit committee.
  • Known history of violations of securities laws by the company, related entities and its executives or board members.
  • Overly complex organizational structure involving unusual entities.

CGAs should be aware of the basic types of financial statement fraud and the red flags that mandate closer examination. This basic knowledge will help CGAs and their clients from falling victim to fraudsters who seek to deceive investors, creditors and others with materially false financial statements.

OPP Warns Canadians Not to Fall for New Online Health Scams Related to COVID-19

It has been weeks since the onset of the COVID-19 pandemic and it is not yet showing signs of slowing down anytime soon. And yet, members of the Ontario Provincial Police or the OPP Anti-Rackets Branch’s Health Fraud Investigation Unit (HFIU) is busier than ever, citing an increase in the number of health care related scams linked to COVID-19 as the reason. OPP Anti-Rackets HFIU says that the new COVID-19 scams are targeting unsuspecting innocent Canadians to extort money and personal information.

Warning to Ontario Residents

Ontario residents are warned by OPP Anti-Rackets HFIU that they need to be extra vigilant as a lot of new online COVID-19 scams are specifically trying to gather health information through ‘harvest’ sites. Fraudsters are designing the harvest sites to look like legitimate websites and then trick victims into providing their sensitive personal information.

Fake Health Websites

The newly created websites pose as virtual care websites that at first glance can seem like websites designed to provide convenient and proper healthcare services to people. The truth is, the fraudulent websites use sophisticated malware to harvest personal information from people that can later be used for fraudulent billing or healthcare services and identity theft. In some cases, the scammers are extorting money from victims or asking for an upfront fake administrative fee for nonexistent services.

Protect Yourself Against Online COVID-19 Scams

Scammers take advantage of people’s emotional responses and prevailing misinformation to manipulate unsuspecting individuals. The best way that you can protect yourself is to stay informed and to follow the guidelines below:

  • Be skeptical of companies claiming they got COVID-19 cure and guaranteed prevention
  • Ask a lot of questions before providing information such as your Ontario Health Card Number, version code, or other personal information
  • Refrain from downloading any attachments from unfamiliar websites or email
  • Know that it is possible that spoofed source can look like a legitimate website or email
  • Going to a physician’s office should not incur additional technical charges or surcharges for sanitizing cost and the like
  • Make sure to verify who is calling if a call is requesting for your personal information
  • Do not be afraid to say no to anyone who contacts you for your credit card information, bank account number, driver’s license number, health card version code, or any other personal identifying information
  • It is perfectly okay to end all communication or contact with individuals or companies who keep on asking for sensitive information over the phone during COVID-19

Should you need more advice and information to help you avoid COVID-19 scams, be sure to refer to the Ontario Ministry of Health coverage and information or contact your insurance provider especially if you have queries about your insurance coverage.

If you know someone or think that you’ve been targeted for a health care related scam, insurance scam, or any COVID-19 scam, feel free to contact the Canadian Anti-Fraud Centre or the police to report the possible fraud. If you need help to further protect yourself or to gather evidence for a report, contact us today at Haywood Hunt & Associates Inc. 


COVID-19 Insurance Scams to Watch Out For

COVID-19 scams are on the rise, including insurance scams. Although most of the country is either social distancing or are on lockdown, the fraud-fighting community is seeing a rise in the number of insurance fraud cases. The rise is very noticeable and is enough to prompt organizations to issue alerts for their consumers.

Playing with Vulnerabilities

As we face a health crisis, people are understandably more anxious and fearful regarding what the future may hold for them. Add to this the fact that a pandemic brings in a set of problems that institutions are not ready for, and it is easy to see how criminals would see the situation as an opportunity to commit fraud.

How does one recognize if something is fraudulent, then? National Insurance Crime Bureau Senior Vice President James Schweitzer says that if something sounds too good to be true, then something might be afoot. He adds that scammers are targeting people by appealing to the inherent desire for information and hope. Scammers send emails and post ads on social media that appeal to this human need and then ask for personal information such as Social Security Number, credit card information, and similar sensitive data. Victims may then get their identity stolen from them or used for illegal activities. Below are other COVID-19 scams to watch out for.

COVID-19 Insurance Scam

Bogus insurance agents are trying to mimic mainstream and legitimate companies and pitching to sell COVID-19 insurance. The Coalition Against Insurance Fraud urges people not to follow their links or entertain their calls as there is no insurance product that covers COVID-19 problems the way they are marketing it.

COVID-19 Car Insurance Scam

Even with minimal vehicles on the streets, scammers will find a way to purposely cause accidents to be able to file a claim against their own insurance or a target’s insurance. These staged accidents work for car insurance scam because social distancing means fewer witnesses as well as people not taking a closer look at fake injuries to avoid a possible infection with COVID-19.

COVID-19 Travel Insurance Scam

There is a proliferation of bogus travel insurance policies that claim coverage for trip cancellations related to COVID-19. Note that most travel insurance policies have no coverage for pandemics, so a COVID-19 coverage is an immediate red flag. A Cancel for Any Reason coverage or a CFAR is most often just a sales pitch and had to be purchased separately within strict limitations.

COVID-19 Phishing Scam or Spoofing Scam

Unsolicited emails that look like they are from legitimate companies and requesting for personal information are most likely bogus. So are messages from companies who claim to have access to cures, ventilators, COVID-19 diagnostic kits, and the like. It is best to not fill out any forms from such messages and to simply mark the message as spam.

Fraud is truly on the rise these days. It pays to be extra careful and read up on ongoing scams particularly the ones that the Canadian Anti-Fraud Centre warned about aside from the COVID-19 scams above. Exercise extra prudence more so with unsolicited communication too. If you think that you have been scammed or has been targeted by scammers, contact us to inquire about the ways that our private investigators can help you protect yourself using our private investigation services.